The opinion of the court was delivered by: James Knoll Gardner, United States District Judge
This matter is before the court on Defendants' Motion to Dismiss Plaintiffs' First Amended Complaint, which motion was filed November 12, 2008. Plaintiffs' Response to Defendants' Motion to Dismiss Plaintiffs' First Amended Complaint was filed December 1, 2008. For the following reasons, I grant defendants' motion and dismiss the First Amended Complaint.
Jurisdiction in this case is based upon diversity of citizenship pursuant to 28 U.S.C. § 1332 and federal question jurisdiction pursuant to 28 U.S.C. § 1331. The court has supplemental jurisdiction over plaintiffs' pendent state law claims. See 28 U.S.C. § 1367.
Venue is proper pursuant to 28 U.S.C. § 1391(b) because defendant Superior Living Products, LLC maintains its principal place of business in Pottstown, Montgomery County, Pennsylvania, and defendant Joseph Scott resides in Boyertown, Berks County, Pennsylvania, both of which are located within this judicial district.*fn1
Plaintiffs initiated this breach of contract action on October 22, 2007 by filing a nine-count Civil Action Complaint ("Complaint"). The dispute arises from a Dealership Agreement between the parties by which plaintiff Raphael Morales was to be an affiliated agent or dealer of walk-in bathtubs. Plaintiffs aver that defendants fraudulently induced Mr. Morales to enter the agreement by promising to deliver to him a bathtub for his personal, household or showroom use, but failed to deliver the bathtub.
The original Complaint alleged eight substantive causes of action: (I) negligent misrepresentation, (II) fraudulent misrepresentation, (III) breach of contract, (IV) fraud, (V) civil RICO, (VI) violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), (VII) loss of consortium, and (VIII) punitive damages. Plaintiffs pled their prayer for relief as Count IX.
On November 29, 2007, defendants moved to dismiss plaintiffs' Complaint. By Order dated September 10, 2008, I concluded that in order to properly review plaintiffs' allegations under the standard of review for a motion brought under Rule 12(b)(6) of the Federal Rules of Civil Procedure, plaintiffs needed to amend their complaint to clarify numerous factual issues. Specifically, I noted that the Complaint was ambiguous as to which plaintiff executed the agreement at issue and did not include the terms of the agreement, and that the contract itself was not attached to the Complaint.
Moreover, I noted that plaintiffs had not pled their fraudulent misrepresentation, fraud, and UTPCPL claims with particularity as required by Rule 9(b) of the Federal Rules of Civil Procedure, and that a more definite statement of the alleged RICO claim and predicate acts were required.
Therefore, I directed plaintiffs to plead their factual allegations with more specificity, and I dismissed defendants' motion to dismiss without prejudice to re-file it, if appropriate, after the filing of an amended complaint.
On October 27, 2008, plaintiffs filed their First Amended Civil Action Complaint ("Amended Complaint"). The Amended Complaint alleges seven causes of action: (I) negligent misrepresentation, (II) fraudulent misrepresentation, (III) breach of contract, (IV) fraud, (V) civil RICO, (VI) violations of the UTPCPL, and (VII) loss of consortium.
On November 12, 2008, defendants filed the within motion to dismiss. Plaintiffs responded in opposition to the motion on December 1, 2008. Hence this Opinion.
A claim may be dismissed under Federal Rule of Civil Procedure 12(b)(6) for "failure to state a claim upon which relief can be granted." A 12(b)(6) motion requires the court to examine the sufficiency of the complaint. Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 102, 2 L.Ed.2d 80, 84 (1957) (abrogated in other respects by Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).
Ordinarily, a court's review of a motion to dismiss is limited to the contents of the complaint, including any attached exhibits. See Kulwicki v. Dawson, 969 F.2d 1454, 1462 (3d Cir. 1992). However, evidence beyond a complaint which the court may consider in deciding a 12(b)(6) motion to dismiss includes public records (including court files, orders, records and letters of official actions or decisions of government agencies and administrative bodies), documents essential to plaintiff's claim which are attached to defendant's motion, and items appearing in the record of the case. Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 nn.1-2 (3d Cir. 1995).
Except as provided in Federal Rule of Civil Procedure 9, a complaint is sufficient if it complies with Rule 8(a)(2). That rule requires only "a short and plain statement of the claim showing that the pleader is entitled to relief" in order to give the defendant fair notice of what the claim is and the grounds upon which it rests. Twombly, 550 U.S. at 555, 127 S.Ct. at 1964, 167 L.Ed.2d at 940.
Additionally, in determining the sufficiency of a complaint, the court must accept as true all well-pled factual allegations and draw all reasonable inferences therefrom in the light most favorable to the non-moving party. Worldcom, Inc. v. Graphnet, Inc., 343 F.3d 651, 653 (3d Cir. 2003). Nevertheless, a court need not credit "bald assertions" or "legal conclusions" when deciding a motion to dismiss. In re Burlington Coat Factory Securities Litigation, 114 F.3d 1410, 1429-1430 (3d Cir. 1997).
In considering whether the complaint survives a motion to dismiss, both the District Court and the Court of Appeals review whether it "contain[s] either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory." Twombly, 550 U.S. at 562, 127 S.Ct. at 1969, 167 L.Ed.2d at 945 (quoting Car Carriers, Inc. v. Ford Motor Company, 745 F.2d 1101, 1106 (7th Cir. 1984)) (emphasis in original); Haspel v. State Farm Mutual Auto Insurance Company, 241 Fed.Appx. 837, 839 (3d Cir. 2007).
Based upon the averments in plaintiff's First Amended Complaint, which I must accept as true under the foregoing standard of review, the pertinent facts are as follows.
On or about December 25, 2006, defendants and plaintiff Raphael Morales ("Mr. Morales") executed a Dealership Agreement for the sale of walk-in bathtubs by which Mr. Morales was to be an affiliated agent or dealer. Plaintiff paid defendants approximately $20,871.63. Defendant Superior Living Products, LLC was to provide him with an exclusive marketing area, train him, and provide assistance with marketing and leads.
Additionally, defendants were to deliver to Mr. Morales a bathtub for his personal, household or showroom use. During the negotiation of the agreement, defendant Joseph Scott represented to plaintiff that defendant Superior manufactured the bathtubs. Plaintiff later determined that Superior did not manufacture the bathtubs, but rather bought them from other distributors.
In January 2007, plaintiff attended a training session with four or five other Superior-affiliated agent/dealers. After the training, plaintiff began to follow leads in an effort to sell bathtubs, and began an association with Kenny Cohen, who acted as a subcontractor. Within a month after the training session, plaintiff and Mr. Cohen found a business opportunity with the possibility of selling fifty bathtubs.
To proceed with this business opportunity, plaintiff needed the sample bathtub provided for in the Dealership Agreement. Plaintiff demanded that defendants deliver the bathtub. Superior sent a bathtub from a different distributor, and Mr. Cohen was contacted regarding the delivery of this bathtub.*fn2 Plaintiff refused delivery of the bathtub, which plaintiff characterizes as "not a Superior product", because it did not comply with the terms of the Dealership Agreement. Defendants then accused plaintiff of an anticipatory breach of contract and refused to perform under the Dealership Agreement, causing harm and damages to plaintiff.
Defendants contend that the Amended Complaint should be dismissed in its entirety because the Dealership Agreement contains a mandatory arbitration provision. Specifically, defendants aver that the arbitration provision requires that "[I]f the parties are unable to resolve any dispute, controversy or claim arising under this Agreement (each a Dispute), such Dispute will be submitted to the Vice President (or higher) of each of the Parties for Resolution. If such officers are unable to resolve the Dispute within 10 days after submission to them, the dispute shall be solely and finally settled by arbitration in accordance with the Arbitration Rules of the American Arbitration Association". Defendants argue that this dispute falls within the scope of the arbitration provision, and therefore should be dismissed and submitted to arbitration.
In the alternative, defendants contend that all counts of the Amended Complaint should be dismissed. First, defendants aver that all of plaintiffs' misrepresentation, fraud-based, and breach of contract counts should be dismissed because the Dealership Agreement includes an integration clause. Specifically, defendants contend that the Dealership Agreement does not promise that Superior would manufacture the bathtubs, and that to the extent any oral promises were made in the course of negotiations, such promises are not part of the Dealership Agreement. Moreover, defendants contend that the integration clause specifically bars contract claims involving representations during negotiations.
Second, defendants aver that Counts I (negligent misrepresentation), II (fraudulent misrepresentation) and IV (fraud) should be dismissed under the gist-of-the-action doctrine, which bars tort-based claims brought in a breach contract action.
Third, defendants contend that the Amended Complaint fails to state a RICO claim because Count V fails to identify which of the four statutory RICO violations apply, and fails to allege a pattern of racketeering activity as defined by 18 U.S.C. § 1961(1).
Fourth, defendants argue that plaintiffs' UTPCPL claim, Count VI, should be dismissed because the UTPCPL permits a private right of action only where a defendant is engaged in an unlawful act in connection with a consumer transaction. Defendants aver that the transaction under which Mr. Morales was to become a dealer was a commercial transaction, the purpose of which was to establish a dealership agreement, and was unrelated to personal, family or household purposes. Therefore, defendants contend that the UTPCPL is inapplicable to the transaction.
Fifth, defendants contend that Mrs. Morales' loss of consortium claim should be dismissed because a claim for loss of consortium can arise only from a spouse's physical injury, which has not been pled in this case. Moreover, defendants aver that even if there were a physical injury alleged in this commercial contract case, plaintiffs have not alleged any impact on the marital relationship. Therefore, defendants argue that the loss of consortium claim (Count VII) should be dismissed.
Finally, defendants contend that plaintiffs' claim for punitive damages should be dismissed because the facts alleged in this action do not rise to the level of willful, wanton or reckless conduct, and because the parties' arbitration agreement provides that punitive damages are not available.
Regarding the arbitration provision, plaintiffs contend that defendants have waived their claim for contractual arbitration by litigating this matter, rather than filing a motion to compel arbitration immediately upon entering an appearance in this matter. Specifically, plaintiffs aver that because defendants filed the within motion to dismiss and the previous motion to dismiss, "[p]laintiffs were forced to aggressively litigate" and this court has been required to adjudicate the matter, "all contrary to the express purpose of contractual arbitration to Plaintiffs' prejudice vis-à-vis time delay, unnecessary litigation and litigation's attendant cost." (Plaintiffs' response, page 9.)
Moreover, plaintiffs aver that the arbitration provision itself is invalid, and that their claims in this matter fall outside the scope of the arbitration provision because they are unrelated to the agreement at issue.
Regarding the integration clause, plaintiffs contend that defendants' oral promise and Superior's failure to manufacture the bathtub are admissible as evidence of defendants' "pre-meditated intent to convert". (Plaintiffs' response, page 11.) Plaintiffs further aver that "[t]he integration clause in no way speaks to Plaintiffs' claim of Defendants' national effort [to] retrieve funds from unwary first-time franchisees never intending to perform in any respect." (Id.)
In response to defendants' remaining arguments, plaintiffs contend that gist-of-the-action doctrine argument does not apply because this action is not merely a breach of contract action; that plaintiffs are not required to plead their RICO claim with specificity because the RICO statute is self-descriptive, and that their UTPCPL claim should survive because the initial bathtub delivery was intended for personal and household use, as well as commercial use. Plaintiffs further contend that Mrs. Morales' loss of consortium claim should survive as derivative of each tort claim, and suggest that defendants' alleged conduct caused Mr. Morales to suffer emotional distress giving rise to Mrs. Morales' claim for loss of ...